On June 1, Hong Kong’s Securities and Futures Commission (SFC) unveiled a list of cryptocurrency exchanges with licenses that are close to approval.
According to the SFC website, 11 applicants, including Matrixport HK, Accumulus, Crypto.com, and Bullish, are considered licensed. Other platforms on the list are HKbitEX, PantherTrade, DFX Labs, Bixincom, xWhale, YAX, and WhaleFin.
Hong Kong's stringent requirements deter major exchanges
If approved, these companies will bring the number of licensed exchanges in Hong Kong to 13. Currently, only OSL Exchange and HashKey have licenses granted before the new regulations take effect in June 2023.
However, the SFC clarified that these exchanges, which are considered licensed, are not yet officially licensed. Additionally, it advised investors to exercise caution when trading on these platforms, as they may not be licensed and may have to cease operations in the province.
Over the past year, the province has aimed to become a hub for digital assets. However, its strict rules, while designed to protect investors and prevent money laundering and terrorist financing, have created significant barriers for many exchanges. The SFC has reportedly instructed exchange license applicants to ensure their products are not available to mainland Chinese users, even though China has banned cryptocurrencies.
These stringent requirements have prompted major exchanges such as OKX, Gate.io, Kucoin, Binance, and HTX (formerly Huobi) to withdraw their applications for a Virtual Asset Trading Platform (VATP) license in Hong Kong.
Notably, the withdrawals of these platforms have drawn scrutiny over the handling of the SFC application process. Hong Kong lawmaker David Chiu has questioned whether the city can truly become a hub for financial innovation given the many restrictions imposed at this early stage.
Many industry insiders worry that the new licensing regime will turn into a carbon copy of the food truck incident or even a case of the government promoting virtual banks, with much ado about nothing. They worry that authorities will repeat the same mistakes and that even if operators are granted licenses, it will be difficult for them to develop a profitable model.
Furthermore, Chiu claimed that the new licensing regime is shaking market confidence. He pointed out that many of the approval requirements are borrowed from traditional finance, which is too stringent for Web3. The industry’s response to these challenges will be crucial in shaping the future of crypto exchanges in the region.
